Six Sigma in healthcare: lessons learned from a hospital 381
Ronald J.M.M. Does is Professor in Industrial Statistics at the Department of
Mathematics and Managing Director of the Institute for Business and Industrial
Statistics of the University of Amsterdam. Does received his MSc and PhD
at the University of Leiden. Does has published seven books and more than
75 papers in the fields of management, mathematics, quality, psychometrics,
and statistics. Does has implemented Six Sigma in industry, service industry
John P.S. Verver is Master Black Belt at the Red Cross Hospital in
Beverwijk, the Netherlands. Before that, he worked for more than seven
years as Industrial Engineer and Black Belt at DAF Trucks (a Paccar company)
in Eindhoven. Verver received his MSc at the University of Twente,
Six Sigma is an integrated approach for pursuing continuous improvement of customer
satisfaction as well as organisational profits (Snee, 2004). Six Sigma was developed at
Motorola in 1987. In the mid-1990s, General Electric started implementing Six Sigma.
The GE 1997 Annual Report states that Six Sigma delivered more than US$300 million
to its operating income. Subsequently, many companies, such as American Express,
Boeing, Citibank, Ford, and 3M, have followed General Electric (Breyfogle, 2003). More
recently, applications of Six Sigma have also been suggested in healthcare (Barry et al.,
2002; Stahl et al., 2003). We introduced Six Sigma at the Red Cross Hospital with the
purpose of enhancing continuous improvement in combination with our ISO quality
management system. ISO and Six Sigma have proven to be highly complementary in
other organisations (Warnack, 2003). In this article, we first describe Six Sigma. We then
demonstrate the implementation of Six Sigma in our hospital. Finally, we present our
results and discuss our experiences.
2 Six Sigma
Organisations that implement Six Sigma invest in quality improvement, cost reduction
and efficiency improvement. The term Sigma, used by statisticians, defines the standard
deviation of a random variable. A number of times sigma indicates the amount of
defects that are likely to occur in a given (production or service) process. A three sigma
process, for example, has a defect rate of 6.7%, while a Six Sigma process has only
3.4 defects per million opportunities. The objective to achieve processes to perform at
Six Sigma-level symbolises the systematic pursuit of breakthroughs. Defects cause
an increase in costs. Six Sigma reduces costs by reducing the number of defects
(Bisgaard and Freiesleben, 2000). Several variants of the programme are current (e.g.,
Harry, 1997; Breyfogle, 2003).
In order to quantify the performance of a given process, a Six Sigma project starts by
defining and implementing relevant measures and metrics, the so-called Critical To
Quality characteristics (CTQs). Six Sigma tackles performance problems in four phases:
Measure (M), Analyse (A), Improve (I) and Control (C). These phases consist of 12 steps
382 J. van den Heuvel, R.J.M.M. Does and J.P.S. Verver
that guide a project leader in the execution of a quality improvement project (Harry,
1997). In addition to this stepwise project approach, Six Sigma contains an organisational
structure. Project leaders, which are called Black Belts or Green Belts, are trained
in project management, problem solving methodology, and statistical methods. The
stepwise strategy that Black Belts and Green Belts follow enables them to make a proper
problem definition and a data based diagnosis before undertaking attempts at solving the
problem. Tools used in Six Sigma, such as Quality Function Deployment (QFD) and
Pareto analysis, link customer demands to product features and establish the relative
importance of various problems. Managers, in their roles as coach, (the so-called
Champions) review the progress of a project and ensure that the Black Belts and Green
Belts focus on the interests of the organisation. Experts on the Six Sigma methodology
are called Master Black Belts and they are responsible for managing the Six Sigma
organisation. Through this structure, Six Sigma is able to combine the available
knowledge from the various functions in an organisation to achieve the best possible
process improvements (Jensen, 1998). The focus of Six Sigma on data and the statistical
verification of conclusions have proven to be a good counterbalance to the often more
subjective and intuitive way of working in healthcare.
3 Experiences with Six Sigma in healthcare
One of the first healthcare organisations to fully implement Six Sigma was
Commonwealth Health Corporation in 1998 (Thomerson, 2001). This was achieved with
the help of consultants from General Electric. The Commonwealth Health Corporation
has 500 plus beds and is a multi-site health system with the headquarters in Bowling
Green, Kentucky, USA. The implementation gave positive results. Throughput in
the radiology department was improved by 33% and costs per radiology procedure
decreased by 21.5%. At the beginning of 2002, Commonwealth had invested about
US$900,000 in Six Sigma, which lead to savings in excess of US$2.5 million (Lazarus
and Stamps, 2002b). A number of healthcare organisations have followed the example of
Commonwealth Health Corporation with even better results (Sehwail and DeYong,
2003). Mount Carmel Health System, a three-hospital system in Columbus, Ohio with
7300 employees reported a financial return of US$3.1 million with expectations for these
financial returns to grow rapidly as more Six Sigma projects are completed (Lazarus and
Stamps, 2002b). Charleston Area Medical Center, a 919-bed three-campus medical centre
in West Virginia, achieved US$841,000 in savings on supply chain management by
using Six Sigma (Lazarus and Stamps, 2002a). Thibodaux Regional Medical Center, a
non-profit 149-bed hospital in Louisiana, started implementing Six Sigma in 2001. Their
projects were in the areas of accounts receivable days, medication management, patient
safety, employee satisfaction, hospital acquired infections, and medical management. In
May 2002, they reported a savings of more than US$475,000 per year (Stock, 2002).
Earlier reports on our own experiences at the Red Cross Hospital in Beverwijk, the
Netherlands, were equally convincing (van den Heuvel et al., 2004).
Six Sigma in healthcare: lessons learned from a hospital 383
4 Implementation and results at the Red Cross Hospital, Beverwijk
The Red Cross Hospital is a general hospital with 384 beds located in the Netherlands
with an annual budget of €72 million. The Institute for Business and Industrial
Statistics at the University of Amsterdam supported the implementation of Six Sigma
in this hospital. It started with the one-day introduction training for management and
directors. In order to implement Six Sigma successfully, some apparent minor
adaptations were necessary. First, we reduced the threshold for initiating a project
from €100,000 to €20,000. Secondly, we only used Green Belts to run the projects.
Finally, Green Belts were allowed to run the projects in couples, instead of one Green
Belt per project.
The first group of 15 Green Belts started their training in September 2002.
Seven projects were initiated. To stimulate commitment, participants were allowed
to choose the subject of their projects. In February 2003, the second group of Green
Belts started. The hospital directors incited managers to train a sufficient number of
Green Belts and maintain a substantial programme of new projects. Gradually, project
selection was taken over by management to ensure alignment with the strategic goals of
As the number of projects increased, the necessity for coordination and management
of the Six Sigma programme became evident. We observed that Green Belts faced
difficulties in closing their projects. Decisively, we appointed a Master Black Belt to
set up a management control system to evaluate progress and to support Green Belts
in finishing their projects. The Master Black Belt organised the necessary training
programmes and ascertained that once Green Belts completed a project, they initiated
another project. In September 2004, the fifth group of Green Belts began with their
projects. Co-workers started to show more and more interest in following a Green
Belt training. We have consistently started new groups of approximately 15 employees
every six months. Participants emerged from different departments and disciplines
within the organisation. We developed a special training for medical specialists.
Recently, we started training employees from partner-organisations, such as home care
and a nursing home, to initiate projects that improve cooperation, communication and
quality of care.
Table 1 shows the cumulative number of Green Belts trained and the number of
projects that have been initiated.
Table 1 Numbers of Green Belts and Six Sigma projects
Six Sigma 2002 2003 2004
Green Belts 15 38 63
Projects 7 19 44
Currently, 44 projects were started and 21 projects are closed. The total savings amount
to €1.2 million. The expected total net annual savings of all running projects are
estimated at €3 million. These amounts are cumulative savings on an annual basis.
Table 2 shows the development of savings and costs per year.
384 J. van den Heuvel, R.J.M.M. Does and J.P.S. Verver
Table 2 Investments and revenues in euro of the Six Sigma approach
Six Sigma 2002 2003 2004 Total
Costs 40,000 88,000 101,000 229,000
Savings 0 0 1,268,000 1,268, 000
Results –/– 40,000 –/– 88,000 1,167,000 1,039,000
Costs are related to training, consultancy and hospital personnel that have been employed
to support the Six Sigma organisation. The salaries of Green Belts were only included
when extra personnel had to be employed to replace them. Savings are actual achieved
total net savings from all running and completed projects. They include reductions in
labour time spent by employees, only if this time could be utilised elsewhere.
Table 3 shows a number of projects and their estimated target savings and actual
Table 3 A selection of Green Belt projects (savings in euro)
Project Target savings Annual savings
Improving patient scheduling operating theatre 50,000 229,000
Reducing accounts receivable 20,000 225,000
Optimising technical maintenance 20,000 211,400
Reducing formation of physiotherapists 25,000 64,400
Revision of terms of payment 20,000 60,000
Reducing admission time hip replacement 46,000 56,000
Reducing admission time after delivery 25,000 56,000
Improving logistics linen distribution 50, 000 44,000
Availability ambulatory files 37,000 37,000
Reducing waiting times first contacts cardiology 34,000 34,000
We have been able to initiate Six Sigma projects in almost every unit and relate it to each
discipline in our hospital (van den Heuvel et al., 2005). As mentioned before, we use an
amount of €20,000 as a threshold for initiating projects. Based on 21 projects, the average
savings per project amount to €68,000.
5 Lessons learned from the implementation of Six Sigma in a hospital
5.1 Categorising of the projects
A number of areas can be identified that are particularly profitable to initiate projects.
Below we give an overview of the projects in five categories:
1 Shortening the length of stay of patients
The first group of projects where substantial savings can be realised quite easily
are related to reducing admission time. To achieve this, the clinical pathway of a
given disease has to be described and optimised using various Six Sigma and Lean
tools (George, 2003). This will invariably lead to considerable cost reductions
Six Sigma in healthcare: lessons learned from a hospital 385
because currently, the full content of a clinical pathway is seldom analysed and
evaluated from the perspective of every participating healthcare provider. Therefore,
redundancy in activities, examinations and administration resulting in unnecessary
costs is most likely to occur in many clinical pathways. In the end, optimising a
clinical pathway as described above will lead to a shortening of admission time or at
least in reducing variability of admission time. Shortening admission time, due to the
nature of the Dutch funding system, has a positive net effect on the budget because
more patients can be admitted using the same capacity. Reducing variability in
length of stay facilitates planning and, subsequently, optimal usage of the available
bed capacity also. Financial savings related to reducing variability have, until now,
been underestimated in our hospital.
2 Minimising the use of materials and devices
A second group of projects is related to minimising the use of materials and devices.
For example, intravenous medication is changed to oral medication at the earliest
possible moment, or reducing the number of intravenous pumps by pooling.
3 Optimising the use of available capacities
A third group of projects pertained with the optimal use of available capacities such
as the capacity of the operating theatre. Starting operations on time and making the
most of available timetables through flexible planning can do this. The same holds
for optimising the use of costly diagnostic scanners such as MRI and CT.
4 Reducing the amount of staff
The fourth group of favourable Six Sigma projects is related to reducing the amount
of staff that has to be employed. Approximately 70% of our annual budget consists
of costs related to personnel. Therefore, reducing the number of employee activities
or tasks within a given process and optimising personnel scheduling can lead to
5 Improving cash flow
The fifth group consists of all activities that are directly related to improving cash
flow. Reducing accounts receivable, which produced €225,000 annual savings,
appeared to be a very successful project in this category. Also a revision of terms of
payment was quite beneficial.
Details of how some of these projects were carried out have been described elsewhere
(van den Heuvel et al., 2004).
5.2 Additional benefits
Apart from the financial benefits, Six Sigma made an important contribution to the
improvement of quality of healthcare. Unlike in industry, where a defective product can
be rejected without any problem, in healthcare defects and rework directly affect the
patient and therefore, the patient’s perception of quality. Shorter waiting lists, elimination
of unnecessary examinations, reducing the number of defects as well as complications
and improving the output of the care process directly contribute to the improvement of
the quality of healthcare. Each Green Belt needs to indicate the amount of savings before
starting his project and needs to monitor progression. This explicit focus on savings
386 J. van den Heuvel, R.J.M.M. Does and J.P.S. Verver
caused some resistance. One got the impression that quality of healthcare had been made
subordinate to money. In fact, we noticed that Six Sigma made an important contribution
to the improvement of quality of healthcare. Especially in healthcare, Six Sigma seems to
work both ways; costs are eliminated and quality is improved (Kooy and Pexton, 2002).
The introduction of Six Sigma in a hospital stimulates a culture of awareness to find
opportunities to improve healthcare delivery and to take responsibility for eliminating
shortcomings. In the past, decisions were too often based on assumptions and feelings
and on inaccurate and incomplete information. By utilising Six Sigma, co-workers now
take responsibility and provide management with solutions based on facts and data.
In the Red Cross Hospital, a quality improvement system was already developed and
functioning within the framework of our ISO 9000 quality management system. Selection
of projects, however, appeared to be difficult. We did not have a standardised project
management approach at our disposal, which lead to significant waste of time and effort
in initiating and running projects. Since we combined projects with regular tasks without
giving employees time off to focus on running their projects, results were delayed. This,
in fact, cost more money because savings were postponed. In Six Sigma, possible savings
of every project were estimated in advance. Based on our estimations, we determined
which project required the highest priority.
The progress of Six Sigma projects is very easy to manage due to the uniformity of
the project approach in 12 steps and well defined outcomes. This transparency has proven
to be a very powerful management tool, supporting directors and managers in defining
and accomplishing the right projects. Cost reductions bear the risk that they affect the
quality of healthcare in a negative way. Therefore, ISO 9001:2000, with a strong
emphasis on quality assurance, combined with Six Sigma emphasising efficiency
improvement, is an excellent combination in our hospital. Further integration of our ISO
quality management system and Six Sigma is advantageous because both systems are
focussed on processes, are client-oriented and data driven.
As in other service organisations, we also encountered some difficulties in
introducing quantitative methods (Does et al., 2002). Nowadays, when employees in our
hospital face an opportunity for improvement, they will often make quantitative analyses
and calculations themselves. They will also give indications as to how the improvement
will contribute, for instance, to the financial aims of the hospital. Facts based on data
prove to be strong arguments to convince medical specialists to change to a different
method of working.
Quality improvement programmes often focus on realising the larger and prestigious
improvement projects. Furthermore, only few privileged employees are allowed to
participate in the programme. In our experience, the attention of the employees returns to
their daily tasks after a while and they inevitably lose interest in the programme. With Six
Sigma, we have invested in an infrastructure and we do not promote specific projects.
Thanks to this infrastructure, every trained employee can start and accomplish any
improvement project within a short time and with little effort.
At the beginning of 2004, our hospital faced a budget deficit threat of €1.5 million.
Instead of discharging employees, managers were asked to define and start enough
projects for 2004, resulting in savings that could eliminate the deficit. As we had gained
enough experience with Six Sigma and as a sufficient number of trained Green Belts
were available, we managed to find the required amount of savings. Presently, we are
ahead of reaching this goal. This outcome clearly proves that Six Sigma is a major
contribution to the continuity of our hospital.
Six Sigma in healthcare: lessons learned from a hospital 387
In 2003, the Institute of Medicine (IOM) produced a report demonstrating that
healthcare has serious safety and quality problems and is in need of fundamental changes.
Care processes are poorly designed and are characterised by unnecessary duplication of
services and long waiting times and delays. Waste is identified as an important
contributor to the increase in healthcare expenditures. In order to better serve the needs of
patients, healthcare systems have to be redesigned (Institute of Medicine, 2003). In our
opinion, Six Sigma is able to address a number of the problems mentioned by the IOM by
improving care processes, eliminating waste and enhance patient satisfaction.
The Red Cross Hospital has successfully implemented Six Sigma and has integrated it
within the ISO 9001:2000 quality management system. In doing so, we have produced
€1.2 million in annual savings. In training employees and having them initiate Six Sigma
projects, we have reduced costs and have improved the quality of healthcare. The results
are comparable with those in industry and other hospitals. Since the Six Sigma
organisation in our hospital is still expanding, we expect to achieve greater substantial
savings in the near future. The fact that Six Sigma successfully combines quality
improvement and cost reduction substantiates that it could be a solution to present day
financial problems in healthcare.
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